L.A.’s Power of Generosity

Long before the term “deregulation” became infamous, representatives from the electric industry were converging on Los Angeles with one objective: taking over our Department of Water and Power.

They were offering so much money, and the DWP was in such dire financial straits, that it would have been foolish for me not to consider their offers to privatize the city’s power supply.

But there is a well-worn credo that successful businessmen follow: When you own something valuable, hold onto it. And that’s what the city of Los Angeles did in 1996.

We tested the waters to see how much the DWP would fetch, and when we realized we had gold--not pyrite--we said no.

This was just one of many decisions the city made after the implementation of the state’s deregulation law. It illustrates the complexity and unknowns of the situation that Californians faced in this electric age. We have been smart, cautious and ultimately lucky. As a result, we have ample power, we haven’t raised rates since I took office, and we won’t raise rates as long as I’m still mayor.

The question now is: Where do we go from here?

In the short term, we must reduce our energy use, sell our excess power to the rest of the state, and make sure we get paid back.

Last week, I directed city departments to implement an energy conservation plan, and they have all cut back on energy use. For instance, Los Angeles International Airport trimmed the hours their colorful pylons are illuminated by more than half, and the DWP drastically reduced the exterior lighting at its normally bathed-in-white-light headquarters downtown. I call upon all Angelenos to follow this example by turning down your heat, turning off your lights when you leave a room, and signing up for the DWP’s Green Power program, so that we can develop sustainable long-term sources of energy.

Why take action when the city has an abundance of power? The reasons are simple. First, we do not live in an economic vacuum. The economies of Santa Monica and San Francisco are inexorably intertwined with ours. If a mother in Santa Monica loses her job or a San Francisco business shuts down, these events ripple through our economy and touch our lives.

More important, we have a moral obligation not to waste electricity when the rest of the state struggles each morning to turn on the lights. Throughout the state, infants need incubators and the elderly need heat; power literally keeps our citizens alive. That is why Los Angeles is overproducing, and powering up to 1 million homes outside the city every day.

Still, as the city’s chief executive I have a responsibility to the ratepayers and taxpayers of Los Angeles. Our outstanding balances for power sold in November, December and the first half of January total more than $175 million. If the utilities do not pay us back, then we have to pay the bill. In effect, that constitutes a rate increase (or a delayed rate decrease) for all Angelenos. That is why I have declared that from this point forward, if we’re going to sell additional power, we need assurances that we will be paid back. I have directed the DWP to sell to the state Department of Water Resources, which is backed by the full faith and credit of the state of California.

In addition to generating excess power in the short term, I have also proposed a long-term plan for the state. The ultimate problem is that a dearth of power exists in the market. When supply drops, prices skyrocket. Therefore, we have offered to increase the supply by building a coal-fired power plant in Utah, as long as the state will help us to finance its construction. This plant can be completed in three years--as opposed to seven years if built within California--and will power 400,000 new homes outside Los Angeles as soon as it goes on-line.

Deregulation was supposed to be the magic pill. Instead it turned out to be a migraine headache. Los Angeles is fortunate, but we will not let our neighbors suffer alone. Together we will weather this crisis and keep the lights on in the Golden State.